Friday, June 26, 2009

Cap and Trade - The Numbers

On Fox and Friends Friday morning, Steny Hoyer, Democrat majority leader of the US House of Representatives, claimed the real cost of the 1200 page monstrosity known as H.R. 2454, the Waxman-Markey "The American Clean Energy and Security Act," (commonly known as Cap and Trade) would cost each American household $175 and would create American jobs.

Do not believe this assertion.

Numbers are the ultimate refuge of scoundrels, especially politicians. This $175 per household cost was generated by the non-partisan Congressional Budget Office (CBO), sure enough. But you need to dig through the dry, dense prose of CBO report to understand exactly what the number means.

Undoubtedly, you will hear Democrats trumpeting this number all day, damped only by the news of Michael Jackson's death. The CBO number represents only the day to day operating costs of the program. The CBO number is only a snapshot in time, with the snapshot taking place in 2020, before the full impact of the Cap and Trade program hits America. The full impact of the Cap and Trade carbon restrictions take place AFTER 2020.

Worse yet, the CBO analysis does not include the effects of increased prices of fossil fuels. You know those increased fuel costs that energy utilities, oil companies and any manufacturer using energy or plastic in their products, will be passed directly to YOU, the consumer. From the CBO report:

"The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

So when the Democrats crow about the low cost of instituting Cap and Trade, they are not including the actual energy costs that you will pay as a result of this outlandish scheme to collectivize yet another part of the American economy, they are only telling you how much it will cost to administer and run that program.

One of the most broad economic analyses of Cap and Trade was performed by the Heritage Foundation. This conservative think tank analyzed the economy with and without the carbon tax being imposed by Cap and Trade. Heritage found that in the year 2020, where the CBO analysis shows $175 per household costs to only operate the program, the total economy would be depressed by something in the order of $161 billion, or roughly $1870 per household of four. This is the estimated increased cost of the energy you will be forced to pay. When all of the restrictions imposed by the Cap and Trade bill are fully enforced in 2035, Heritage estimates the household costs to be in excess of $6800 per year.

But there's more. Some areas of the US rely more heavily on fossil fuels to generate power, and those wide open spaces of the midwest and west mean that people and goods must travel large distances in cars and trucks. CBO estimates have been averaged over the entire nation, as is the Heritage number cited above. However while performing its analysis, Heritage was prescient enough to consider the geographical effects. Those areas more reliant on fossil fuels will have higher costs, while those areas serviced by wind, solar and nuclear power (currently a very small percentage of consumers because of the onerous environmental regulations surrounding these alternate technologies) will pay less. So if you live in areas with coal fired electrical plants, or areas where you need to drive a long distance to get to work or transport goods, expect to pay more.

If you don't believe the Heritage analysis, let's look overseas. Britain has had these types of taxes for a few years. The Taxpayers Alliance, a British think tank, estimates the current cost to British consumers is an additional $1300 per year. And in Spain, where government instituted regulations forced non-market driven green technologies into the country's economy, two "regular" jobs have been lost for each "green" job created, and those "green" jobs cost the Spanish taxpayer $1 million per job.

The Republicans have offered an alternative to the Democrat Cap and Trade proposal with little or no real costs, but there has been paltry little coverage in the MSM.

So today, you are going to hear a few things from Democrats. One is that Cap and Trade is relatively cheap. Another is that Cap and Trade is a job creating bill. Here are the numbers, you decide.